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AGs Worry About Cash For Clunkers Scams

Scammers already taking advantage of popular government program

By James Limbach
ConsumerAffairs.com

July 27, 2009

Formally known as the Car Allowance Rebate System, the $1 billion program offers consumers up to $4,500 for trading in certain gas guzzlers for more fuel-efficient cars. The program has captured the public imagination, making it a perfect vehicle for scammers to trap consumers who aren't aware of how the program actually works.

"Scammers often try to piggyback on new programs or trends, and this is no exception," Ohio Attorney General Richard Cordray said.

In Illinois, Attorney General Lisa Madigan is warning consumers to beware of identity-theft scams related to the new program.

"Before this program even officially launched, we were seeing scams pop up online, trying to falsely convince consumers that they must first pre-register and provide their Social Security numbers and other identifying information in order to participate," Madigan said. "That is absolutely not true. Consumers don't need to register or provide any personal information to an outside source before taking advantage of the trade-in credit with a qualified auto dealer."

The program offers $3,500 or $4,500 credits through auto dealers to consumers who trade in less fuel-efficient cars and purchase or lease a new vehicle. The $1 billion initiative is designed to help boost auto sales and put more fuel-efficient cars on the nation's roads.

Madigan said unofficial Web sites have begun to appear online, using similarly named URLs and names, and falsely stating that consumers must first register for the program and asking for consumers' personal information such as a Social Security number or home address. Other sites claim to connect consumers with authorized auto dealers in their local community.

According to the National Highway Traffic Safety Administration, consumers do not need to register or obtain a voucher to benefit from the program. Instead, the auto dealers will apply a credit at the time of purchase.

"Consumers should be wary of anything on the web that isn't cars.gov," said Karen Aldana, a spokeswoman for the NHTSA, which maintains the government's official website for the program.

Aldana said consumers who suspect they've come across a Cash for Clunkers scam should report it to the Office of the Inspector General at the U.S. Department of Transportation at 800-424-9071 or by e-mail at hotline@oig.dot.gov.

To be eligible for the credit, consumers must provide a one-year proof of insurance, registration and a clear title, free of any liens. In addition, the vehicle must have been manufactured within the last 25 years.

Just to add to the confusion, Chrysler is offering $3,500 or $4,500 rebates, or zero-percent, 72-month financing, on most 2009 models -- in effect doubling the government's rebate.

Smart consumers

Consumers need to shop wisely to get the full benefit of the program.

"It's important that consumers get full value for their trade-in," Jessica Caldwell at Edmunds.com in Santa Monica, California, told Consumeraffairs.com. To that end, the Web site is making available a vehicle value calculator. It can be accessed by clicking the "cash for clunkers" icon.

The formula for all of this gets a little complicated. The car you're unloading must get 18 miles per gallon or less to qualify. If the car you buy gets 4-mpg- to-9-mpg better mileage than your trade-in, you get $3,500. An improvement of 10-miles-per- gallon nets you $4,500.

In the case of light trucks, the new vehicle will have to get at least 18 mpg. There's a $3,500 credit for a 2-mpg-to-5-mpg improvement, $4,500 for 5 mpg or more.

In addition, your trade-in has to be drivable, and you have to have proof that it has been insured and registered for the past year.

As you might expect, the program has brought forth an army of scamsters trying to make a quick buck off the bill.

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